Thanks to an ill-advised law enacted with bipartisan support in 2007, the cost of providing an entry-level job to individuals with few skills or minimal experience will be going up by more than 10 percent. Those who cannot find a job paying at least $7.25 an hour will not be permitted to work. Welcome to the latest chapter of America's minimum-wage folly.

Those who press for a higher minimum wage often claim that making entry-level jobs more expensive won't reduce the number of entry-level jobs. Were the government to compel a 41 percent increase (see graph above showing the 41% increase in the minimum wage from $5.15 in 2006 to $7.25 this year) in the price of gasoline or movie tickets or steel, every rational observer would expect a drop in the demand for gasoline, movie tickets, or steel. Yet when it comes to the minimum wage, politicians and journalists somehow persuade themselves that making workers more expensive won't reduce the demand for workers.

But that's exactly what it does. Artificial price floors - mandatory minimum prices set higher than what the market will bear - generate surpluses. Minimum-wage laws are no exception. The price floor imposed by the government on the supply of low-skilled labor results in a labor surplus, which is just another way of saying higher unemployment.

The laws of supply and demand are not optional. They weren't enacted by Congress and Congress can't override them. Minimum-wage laws don't make low- and unskilled Americans more productive, more experienced, or more desirable. They merely make them more expensive - and more likely, therefore, to be unemployed.

People often think of the minimum wage as a restriction on employers -- that they cannot pay less than a certain number for a job. But it is also equally a restriction on job seekers -- my son cannot legally offer to take a job for less than $7.25, even though he would probably gladly do so. For teenagers, just gaining the experience of working and building basic skills (like showing up on time, following procedures, interacting with customers and fellow employees) has enormous value, such that even a nominal payment of a few dollars an hour would more than compensate him for his labor.

But I think there is another factor that increasingly limits teenage jobs that is not often discussed - liability. I never really thought about this until I was running a business and found that my company and I may be personally liable for bone-headed decisions made by far off employees I have never met. In our super-ligious society, does a company really want 15-year-old boys interacting with the public, no matter how much or little they are paid, when even one teenage-boy-style flip comment or sexual joke might result in a lawsuit?

Previously, I have written a number of articles on the minimum wage focused on the other end of the age scale. My company hires folks in the seventies and eighties, a practice that is increasingly difficult to maintain with the minimum wage increasing.

Unfortunately, another hinderance is your son's age. If he's under 18, there are many places that won't hire him because of the many restrictions for type of duties, hours he can work, can't work too late on week days, etc. My wife is an HR manager, and they are a first time employer for a lot of folks. But with so many restrictions for "child labor", they have just about given up on hiring anyone under 18.

http://politicalcalculations.blogspot.com/ Ironman

Earlier this year, I did a series of posts on the effect of the minimum wage increase in 2007. This was a year in which GDP grew at a 4.8% clip for two consecutive quarters, yet somehow, teen jobs disappeared throughout the course of the year. It was possible to isolate the proposed, then enacted increase in the minimum wage as *the* driver of the disappearance of teen jobs in that year.

Liability played a part in being able to discount the effects of what was then the major fallout from the popping of the housing bubble in the previous year upon teen employment levels. It turns out that very few teens work in the construction industry, since the combination of OSHA restrictions, which prevent those under the age of 18 from even being allowed to work within active construction sites and high liability insurance costs act to sharply reduce the potential pool of teen workers in this field. The actuarial statistics are such that those under the age of 20 are so much more likely to be involved in a workplace accident that the cost of mandated insurance is exceptionally high - so much so that employers much prefer older workers, very much limiting the presences of even 18 and 19 year-olds in the industry.

In any case, here's the series, which is written in the style of a detective story:

What happened? Back when I was working as a busboy in a cafeteria, memory has it I made $.38/hr. Got a job as a pump jockey at the Sunoco, and made $.75/hr, running the place by myself from 6 to midnight. When the owners sold out, I asked for $1.25 an hour. I don't think any of the above rates were at minimum wage.
It was explained to me that minimum wage only applied to interstate affected jobs. The job had to have something to do with interstate commerce for the minimum wage to apply.
Did the rules change?
FWIW, my opinion is that the minimum wage is used as a bleat of 'helping the poor' by the D party, regardless of the effect is has on inexperienced workers job seeking. If you think a bit more, D's, you'd realize that the un-educated HS graduate that can't spell will have a much better chance at ANY job if s/he is paid at a rate where the employer can at least break even... and they get some experience to move on up.
I'm so tired of the political preening that HURTS peoples' lives.
tom

LoneSnark

Yes, the rules have changed. Now only the criminal or the politically connected are exempt from the minimum wage.

Dr. T

Last year my 19-year-old daughter had no difficulty finding a job as a check-out clerk. This year she applied at eight places and didn't get a nibble. The problem is partly the economy and partly the upcoming minimum wage increase. The other factor is that some full-time employees who normally take two or three week vacations in the summer are deferring the vacations. I think they are worried about getting laid off and are building up vacation pay. If my guess is correct, then the domestic vacation & tourist industry will get hammered again this year. (Last year it got hammered by the high gas prices.)

ElamBend

I can't imagine how such a high minimum wage is working out in the rural area where I grew up. It's shocking to me how fast the wage has been ratcheted up, particularly now that we are in a deflationary environment. I'm not sure how that area will ever recover under such circumstances. It will instead encourage more people to move away toward the jobs in urban areas. It is creating a structural system for ruining the rural economy.

Rick C

@ElamBend: "It is creating a structural system for ruining the rural economy."

Well, that's great for the urban planners who want us living in high-rises downtown so we can use light rail to travel, instead of the evil sprawl and car.

stex

I worked for a major waterpark in Texas durning late 1980's early 1990's as the head accountant of their two business, and durning the summer season which lasted 100 days, we would have 1,500 hundred teenagers working durning the day.. Some going to College, some working for their first real time in the workforce.

The company would factor in the min. wage number for a budget and calculate revenues for the year.

Not so easy for a small business trying to make it now in this current evironment.

It would be a job killer for me if I had a small business.

But the Goverment can't seem to figure out small factors like that in their wisdom when passing bills through Congress and the Senate.

Ron H.

@stex: "But the Goverment canâ€™t seem to figure out small factors like that in their wisdom when passing bills through Congress and the Senate."

I don't think raising the minimum wage has much to do with considering small businesses, or with economics at all, for that matter. It has everything to do with rewarding the unions who have made very generous contributions to a congressman's campaign fund. Higher minimum wages means there are fewer lower paid non-union workers to compete with union workers. I believe the unions would like the minimum wage to equal the prevailing union wage.

http://onaridge.blogspot.com windyridge

You ask:"really want 15-year-old boys interacting with the public, no matter how much or little they are paid, when even one teenage-boy-style flip comment or sexual joke might result in a lawsuit?". This possibility is not at all limited to a 15 year old boy. Plenty of adults can be rude and flip.
Fortunately for us, even though we live in a rural area of NY, my soon to be 17 year old had job offers with KFC and Burger King. He currently works for KFC. My soon to be 15 year old is working on a farm a few days a week and getting $8/hr plus meals. Minimum wage increases don't appear to have affected the young or entry level folks here at all. Also I just recently got a good job after 15 years off to raise the boys. I am 50.

he reminisces on ushers in movie theaters, bagboys at supermarkets who would carry groceries to your car, gas station attendants who pumped your gas, cleaned your windows and checked your tires and oil. and the replacement of telephone operators with voice mail.

I had the pleasure of meeting Peter in Las Vegas on Saturday.

Inkster

When 11 years of age I was told I had to wait to 16 to work. Is this cruelty of a sort? What was denied here? I was very interested in radio and would have done after-school work at the neighborhood TV repair shop. Went to a technical school and by 17 had college prep and 1,200 hrs lecture and 1,200 hrs of lab in electronics; but I sure wanted to work at that repair shop.